A case series documenting the Japan Social Innovation and Investment Foundation’s ten-year role in building Japan’s impact economy ecosystem.
TEN YEARS IN THE MAKING:
Building Japan’s Impact Economy
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Table of Contents
Acknowledgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Preface .. . . . . . . . . . . . . . . . . . . . . . . ......................... 4 Introduction . . . . . . . . . . . . . . . . . . . . . ....................... 8 Appendix A : List of Interviewees. . . . . . . . . . . . . ............ 10 Chapter 1: What Makes Japan Special. . . . . . . . . . . . . . . ............... 11 Chapter 2: Japan’s Wicked Problems. . . . . . . . . . . . . . . . ............... 28 Chapter 3: Deliberate Leadership. . . . . . . . . . . . . . . . . ................. 38 Chapter 4: SIIF as Catalyst, Convenor, Collaborator . . . . . . . . . ......... 58 Appendix B: Examples of SIBs (Social Impact Bonds). . . . ... 84 Chapter 5: Case Studies Case Study 1: Insights into Japan’s First Impact Funds . . . . . . . . . ........ 90 Appendix C: Hataraku Fund Logic Model. . . . . . . . ........ 118 Case Study 2: Women as an Economic Driver. . . . . . . . . . . . ............ 121 Case Study 3: Satoyama—A0 Group Investing in Nature-Positive Community Wealth Building. . . . . . . . . . . . . ............. 136 Appendix D: A0 Group Case Study Supplemental Teaching Materials. . . . . . . . . . . . . . . . . . ................. 152 Case Study 4: What is Impact: Who Decides and Why It Matters. . . . .... 164 Chapter 6: Conclusion . . . . . . . . . . . . . . . . . . . . . ..................... 201 2
Ten Years in the Making
Acknowledgments
This case series would not have been possible without the support of the Japan Social Innovation and Investment Foundation (SIIF) and their willingness to share their ten-year journey to create Japan’s Impact Economy. The countrywide scope and decade of work, coupled with real voices and stories of innovation, challenge, and change, make this series an important resource for others with similarly ambitious aspirations. A deep thanks to all SIIF staff for their support, and in particular to the SIIF executive committee members Shuichi Ohno, Mitsuaki Aoyagi, Nanako Kudo and Fumi Sugeno, Head of SIIF Global, for speaking openly about their experiences. This was a collaboration with Oxford colleague Professor Alex Nicholls, who helped with interviews, content, and editing expertise. We appreciate Professor Marya Besharov and the Skoll Centre for Social Entrepreneurship team for their feedback and for providing a platform for this case and film series. Coupling case content with compelling film is rare in academia—such was the charge of talented filmmakers Yasuhiro Moriuchi, founder of Rakuda Studio, and Saya Terai, founder of Zow Films. Thank you both for your professionalism and flexibility. It was a joy to watch you work. There are several Oxford alumni we want to acknowledge for their assistance in offering content suggestions, feedback, and ongoing support throughout the case writing and film production. They include Reiri Miura, Yuya Kato, Tomomi Ishida, and Takeshi Igarashi. Finally, a special thanks to team members for their invaluable research, writing, editing, and design skills. This series would not have been possible without Program Manager Michaela Capps’s attention to detail and persistence. Great appreciation to Dr. Ali Webb, editor Lindsay Lowe, research fellows Miyuki Kiso and Ting Xiang Ong, and designer Lori Walek for helping create a series that is reader friendly, well documented, and tightly edited. Thank you to translator Yvonne Chang, who helped our team bridge our own version of Lost in Translation.
The cover artwork Mt. Fuji and the Sun was created by artist Daiki Ito, who is represented by HERALBONY, a SIIF investee partner.
HERALBONY is a creative company working with artists with disabilities. By presenting their unique expression through art and storytelling, HERALBONY aims to change negative perspectives on disability and create a society where everyone’s “difference” is celebrated. The photo above represents the community of HERALBONY artists.
Gayle Peterson CEO, pfc social impact advisors Associate Fellow, Saïd Business School, University of Oxford Director, Oxford Impact Investing Programme Visiting Fellow, Skoll Centre for Social Entrepreneurship
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Preface
Ten Years in the Making: Building Japan’s Impact Economy (Ten Years in the Making) , a case and film series, is designed to be used by academics and practitioners globally. It will be taught at the Oxford Impact Investing Programme and featured in an upcoming book to be published by Palgrave Macmillan— Good, Evil, Wicked: The Art, Science, and Business of Sustainable Finance. Ten Years in the Making is a snapshot of a moment in time ending in 2024. It is important to acknowledge that 2025 has brought dramatic changes to the Japanese economy through geopolitics. The implications of these changes and their impacts are still unclear. Japan is no longer the fourth-largest economy. It has been surpassed by India. In addition, SIIF has expanded its program efforts globally and it is in the early stages of forming its strategy. In October 2025, Japan also saw the election of its first female prime minister, Sanae Takaichi. These changes are not reflected in this document. Rather, the series provides relevant teaching content for launching an impact economy and the challenges and opportunities for early-stage efforts to build multi-sector partnerships, create new impact funds, integrate community in the investment and systems change process, and provide collaborative leadership models. It is part of a compendium of cases that have been developed over the past decade to examine the strategies global leaders need—and use—to tackle the world’s most wickedly complex problems. According to the World Economic Forum’s 2024 Global Risks Report, the dominant threats that keep leaders awake include climate-related disasters, environmental and biodiversity collapse, digital polarization and misinformation, rising economic tensions and inequality, global power shifts, aging populations, and biotech challenges. For almost a decade, the United Nations Development Programme’s Sustainable Development Goals (SDGs) have offered solutions to these challenges. With an estimated funding shortfall of US$2.5 trillion, the private sector has been called upon to help fill the gap through new cross-sector partnerships 4
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with the public sector and philanthropy. The SDG 2030 deadline is fast approaching—what are the next steps, and who can lead the way? This case series examines how the Japan Social Innovation and Investment Foundation (SIIF) and its partners have attempted to build an impact investing and impact economy in Japan. Their approaches may offer a vision for next steps for the Sustainable Development Goals and innovative investment strategies. Several lessons for this series are under the rubric of Deliberate Leadership, an amalgam of leadership strategies used in the business and social sectors to empower leaders to deal with complexity most effectively. As each Wicked Problem is unique, leaders must choose their approaches carefully. Should they command and control decisions when faced with a crisis? Should they manage the problem by calling on previously successful experiences? When facing a complex challenge, should they be collaborative and adaptive leaders, adjusting their strategy based on clear-eyed understanding of what is and isn’t working? How do leaders hold onto their vision while putting their preconceived notions aside—recognizing the strengths and limits of their expertise and seeking solutions where one might least expect to find them, including within communities affected by the problem and across disciplines? Deliberate Leaders, as explored in this series, are leaders who act with intention and who recognize that they must accept not only the risk of the challenge ahead, but also the consequences of their actions. If Wicked Problems were easy, they would have been solved. When dealing with the world’s most difficult challenges, it is a given that things will go wrong. What’s important is to learn, adapt, and move forward. This series of cases pulls together examples of Deliberate Leaders worldwide to help their peers solve the biggest challenges of our time. The goal of the Ten Years in the Making case and film series is not to prescribe answers but to stimulate discussion and to ask the question—what would you do in these circumstances? Other cases in the compendium represent many “firsts” in using creative capital to address local and global systemic challenges. They include: n UBS Optimus Foundation: From Giving to Investing details how UBS Optimus Foundation moved from grantmaking to a Social Finance portfolio that blends business skills with philanthropy to support outcomes-based investments. The case describes how the UBS corporation embraced this new approach and how staff developed the world’s first Development Impact Bonds in educating girls and health care, as well as social impact bonds. 5
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n ClimateWorks Foundation: Lessons in Leadership and Learning analyzes the William and Flora Hewlett Foundation’s and The David and Lucile Packard Foundation’s US$1 billion investment in creating ClimateWorks Foundation, a global intermediary with a mission to mitigate climate change. n Launching the Working Capital Fund: A Case Study of Humanity United examines how to create a fund that seeds new technology aimed at tracking and ending slavery in the supply chain. It also shows how systems mapping and thinking shapes partnerships, fund goals, and impact measurement. n Flying Blind—Hunting Down New Economic Theories in Times of Crisis, OECD and Democracy Collaborative: Community Wealth Building and Regenerative Economics are two cases supported by Partners for a New Economy that examine alternative economic models and community wealth building. These approaches move beyond neoclassical economic theory developed in the nineteen hundreds and incorporate new progress indicators such as planetary boundaries and nature-positive and regenerative economic models. n Make Money Matter: Expanding Impact Investing for Sustainable Oceans, Fisheries, and Livelihoods examines ways impact investing can support sustainable oceans, fisheries, and livelihoods. This body of work analyzes 150 global funds supporting fisheries and oceans, as well as long-standing funds in forestry, financial inclusion, sustainable agriculture, and health care. Ten Years in the Making allows investors, academics, and practitioners to understand Japan’s Impact Economy through the experiences of the SIIF team and its partners through the following content: Chapter 1 describes Japan’s history and cultural context to set the conditions for building and establishing Japan’s Impact Economy and impact investing community. It also discusses the disconnect in gender parity. Chapter 2 highlights the Wicked Problems confronting nature, Japanese people, and policy makers. Chapter 3 elaborates on Deliberate Leadership strategies with illustrations. Chapter 4 captures SIIF’s strategies over a decade to build an impact investing and impact economy ecosystem by piloting, testing, and building knowledge for the field. 6
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Chapter 5 provides four cases that analyze SIIF’s investments approaches, partnerships, and key issues that emerged from the research about impact. Cases include: n Insights into Japan’s First Impact Funds moves through SIIF’s process for creating a governance structure and making its first deals to capturing impact. The Wellness Fund analysis discusses partnership with Japan Post Insurance and investees. It also describes how its partners integrate VC (Venture Capital) and health care experience to build their systems change portfolio. n Women as an Economic Driver examines the state of gender equity in Japan, its history, advances, and challenges. n A0 Group is a nature-based business devoted to rural economic development . SIIF launched its Systems Change Collaborative in 2023 and A0 Group is the first in a rural forest community. Satoyama—A0 Group Investing in Nature-Positive Community Wealth Building examines the challenges rural entrepreneurs face and the role of investors to offer support to allow companies to survive and thrive in difficult circumstances. n The final case, What is Impact: Who Decides and Why It Matters, poses the questions—who, how, and why should community and beneficiaries be integrated? It is designed to take the Impact Economy community more deeply into deciding why impact measurement and management matter. Chapter 6 and Conclusion ask, what is next for Japan’s Impact Economy based on changing geopolitics? Will Japan’s leadership in sustainable finance hold and boldly expand to allow Japan to take a leading role in offering global solutions, or will it contract under political pressure? An epilogue vignette will be provided on SIIF’s exploration into ways to support a Sustainable Blue Economy. This effort will examine ways to potentially support rural fishing communities and Japan’s unique ocean economy and culture.
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Introduction
Ten Years in the Making: Building Japan’s Impact Economy examines how Japan’s public, private, and philanthropic sectors are collaborating to support an Impact Economy. The case series explores the role the Japan Social Innovation and Investment Foundation (SIIF) and other stakeholders have played over the past decade—first in building an impact investing ecosystem, and then expanding these efforts to support a larger Japan Impact Economy. The Impact Economy recognizes that addressing the world’s most challenging issues, as captured by the United Nations Sustainable Development Goals (SDGs), will require more collaborative capital. This larger reach goes beyond impact investment and represents a more collective way of looking at impact—actively leveraging ESG (environment, social, governance) and sustainable finance at a scale for lasting change.
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This raises several questions : n What does Japan offer the world as a learning and investment model? n What is Japan’s Impact Economy, and how is it different from impact investing? n Who is in the impact ecosystem, and what roles do they play—from catalytic philanthropy to large mainstream financial institutions? n What are Japan’s Wicked Problems, and how are they addressed through leadership and an impact economy? n How is capital mobilized to create measurable social and environmental change? n How is impact aligned across partners in an evolving ecosystem? n What is the future of Japan’s Impact Economy, given local, national, and international geopolitics? To answer these questions, interviews were conducted (in person and virtually) with more than sixty key stakeholders in the Impact Economy. The participants included members of GSG Impact JAPAN, SIIF staff and board members, investees, and external observers familiar with SIIF and the broader Japanese ecosystem. Secondary desk research was also conducted to understand trends, themes, and impact milestones over a ten-year period. (Interviewees are included in Appendix A.)
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Appendix A: List of Interviewees (affiliation as of the end of 2024)
n Nao Sudo n Reiri Miura n Saori Odera n Satoshi Ikeda
Impact Frontiers SIIF Impact Capital Mizuho Securities
n Chunmei Huang n Daisuke Maki n Devahuti Choudhury
Impact Capital
A0 Group
UNDP
FSA
n Fumi Sugeno n Haruka Mera
SIIF
n Sayaka Takatsuka n Sayaka Tomihara n Shigeki Tanaka n Shuichi Ohno n Tadahiro Kaneko n Takumi Kobayashi n Takeshi Igarashi n Takeshi Mizuguchi
Impact Capital
Impact Startup Association Chefs for the Blue Mitsubishi Research Institute Japan Post Insurance United States-Japan Foundation The Norinchukin Bank Social Impact Management Initiative SIIF Impact Capital
METI
Cabinet Office
n Hiroko Sasaki n Hiroshi Komiyama n Hiroyuki Nomura n Jacob Schlesinger n Junki Okamoto n Katsuji Imata n Kazuhiro Umeda n Ken Shibusawa n Kotaro Sueyoshi n Masaaki Amma n Masahiro Kato n Masataka Fukao n Masataka Uo n Masato Noike
SIIF
Sumitomo Mitsui Banking Corporation Japan Post Insurance GLOBIS Corporation Takasaki City University of Economics Energy and Environment Investment
n Tomomi Ishida
n Tomoya Shiraishi Phronesis Partners n Tomoyuki Matsumoto Rennovater Founder n Tsukasa Kanai Sumitomo Mitsui Trust Holdings n Yasunobu Katsuki Mizuho Securities n Yoichi Wagatsuma Sukedachi n Yoshitaka Tabuchi Zebras & Co. n Yoshiko Fujita Philanthropy Advisors n Yuichi Tomohiro
Shibusawa and Company Mizuho Financial Group Mitsubishi UFJ Trust and Banking SIIF Plus Social Investment SEA VEGETABLE COMPANY Northwestern University Kellogg School of Management Ryukoku University JFRA
SEA VEGETABLE COMPANY
n Mayu Ito
n Yuji Suyama n Yuki Nishida n Yuko Koshiba n Yuya Kato n Kenji Shino n Kaori Hayashi n Jennifer Pryce
Zebras & Co.
n Megan Kashner
FSA
Philanthropy Advisors
SIIF
n Megumi Muto
Japan International Cooperation Agency
Patagonia Japan
Patagonia
n Michiru Toda n Mike McCreless n Mitsuaki Aoyagi n Mitsuyuki Unno n Mitsuhiro Matsuzaki
SIIF
Calvert Impact
Impact Frontiers
SIIF
n Jeffrey Cyr
Raven Indigenous Outcomes Funds Save the Children
The Nippon Foundation
A0 Group
n Maggie Korde
n Miyuki Zeniya n Nanako Kudo
Mitsubishi UFJ Financial Group
n Daniel Izzo
Vox Capital
SIIF
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Chapter 1: What Makes Japan Special
Sanpo-yoshi —Good for the Seller, Buyer, and Society Let’s begin with a history lesson that takes us back four hundred years to the Edo (1603-1868) and Meiji (1868-1912) periods. Both were successful and peaceful eras, with the Meiji Restoration of 1868 marking a time of significant political, economic, and social change that brought about the modernization and Westernization of Japan. During this time, Japanese elites and business merchants gained new prominence and defined sanpo-yoshi, a business philosophy emphasizing three pillars: good for the seller, good for the buyer, and good for society. Today, many shinise —long-standing businesses—are global brands that can trace their origins to this era including Mitsui, Sumitomo, Mitsubishi, Konoike, Kawasaki, and Yasuda. Consistently, in interviews with executives across sectors, when asked why Japanese companies support impact and are committed to impact investing, sustainable finance, and ESG, the responses have been strikingly similar to Ohno-san’s sentiments. Japanese companies have a tradition of business commitment to “moral money” and multiple bottom lines. Ken Shibusawa, CEO of Shibusawa & Co., explains, “For centuries, Japanese companies have built into their business DNA the commitment to contributing to and strengthening community and succeeding financially. It has always been part of our culture and business practices.” 2
Imagine a traditional Japanese house—made with strong timbers that are centuries old. This structure is a symbol of Japanese businesses’ deep commitment to community. Now add a modern structure that is equally strong and beautiful and added to the ancient structure, and you understand what Japan offers the world is history, strength, and innovation for impact. — Shuichi Ohno, corporate and philanthropic leader, SIIF Chair of Executive Committee 1
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For Shibusawa, ethical capital is literally part of his family lineage. His great-grandfather, Eiichi Shibusawa (1840-1931), founded Shibusawa Zaibatsu and is regarded as the father of Japan’s modern capitalism. He believed in gapponshugi —that capitalism has the responsibility to be ethical. The elder Shibusawa envisioned Japan’s potential as a leader in Asia and globally by blending Western philosophies, technology, and business strategies with Confucian ethical principles grounded in loyalty, service, and transparency. Although Japan’s samurai society had previously considered business to be the lowest rung of the socioeconomic ladder, the Meiji era ended an isolationist mindset, integrating Western influences and elevating the status of business within Japan’s power structure. Eiichi Shibusawa went on to launch nearly five hundred companies in banking, insurance, shipping, railways, electricity, gas, paper, hotels, and textiles, including the Tokyo Stock Exchange and Tokyo Chamber of Commerce, 3 as well as being involved in the establishment of about six hundred social enterprises and initiatives. 4 His motivation was not just about financial results, but rather about nation building. Public benefit was at the center of Shibusawa’s ethical capitalism, which encouraged the role of the jitsugyoka — business leaders who work honestly and diligently in pursuit of public good. Kotaro Sueyoshi, Advisor to Group Chief Sustainability Officer and Managing Director, Sustainable Business Promotion, Mizuho Financial Group, agrees that Japan’s financial institutions are serious about impact. He stated, “I would say the difference between Japan and other countries is that financial institutions are already actively involved in spreading this idea of impact investing—through ESG and sustainable business.” 5 Mizuho Finance Group, a shinise company, has its predecessor bank as the first bank in Japan, with Eiichi Shibusawa being one of its founders. In 2025, Mizuho Financial Group remains among the top global investment banks—operating in nearly forty countries and regions. 6 It is the third-largest bank in Japan with twenty million customers. 7 Globally, its leadership has been recognized in ESG and sustainable finance, gender equality, human rights, and LGBTQ rights, 8 making climate and nature cornerstones of its ESG investing. 9 Sueyoshi believes that impact through ESG and sustainable finance has been mainstreamed by financial institutions, especially those operating globally.
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“If it is true that men are better than women because they are stronger, why aren’t our sumo wrestlers in the government?” — Kishida Toshiko, educator, writer, activist in the Meiji period
The Great Divide While Japan may have a legacy of business commitment to community well-being, women’s rights activist Kishida Toshiko offers a different perspective on power during the Meiji period. Toshiko was a wealthy female activist and writer who tried to give voice to women’s rights during this important time of growth and transition. Unfortunately, today, Japan is still not meeting the needs of women, even though they represent more than 50 percent of its population. 10 The country ranks lowest in gender equality among the OECD (Organization for Economic Cooperation and Development) nations, and the World Economic Forum Gender Global Gender Gap Report places Japan at 118 out of 146 countries. 11 Data points: n Women earn 25-32 percent less than men. 12 n One in four women experience domestic violence. 13 n Single mothers and single elderly women often live in poverty. 14 n Female entrepreneurs struggle for financing. 15 Some say the plight of women today is rooted in Confucian ideology, fostered by the Meiji period, which clearly separated the public (male) sphere from the domestic (female) sphere. The ideals of ryosai kenbo —the concept of “good wife, wise mother”— have shaped perceived roles and continue to influence cultural expectations today. 16 World War II post-war revision to Japan’s constitution codified many women’s rights— such as the right to vote, to choose a marriage partner, and to access education. The war helped catalyze Japan’s movement to expand women’s rights, but changes were not significant enough to make a lasting impact on today’s society. Crises as a Driver for Impact Innovation Crises—both economic and natural disasters—were often mentioned by interviewees as drivers of Japan’s resilience, innovation, and impact in the face of adversity. Post-War Reconstruction, the Bubble, and the Burst Japan’s more modern economic history has also been shaped by two other significant periods: post-war reconstruction and the economic bubble and burst. After World War II, Japan underwent rapid reconstruction and industrialization at record speed. This period, known as the Japanese Economic Miracle, saw the economy growing at twice the prewar standard by 1955, with continued growth for the next 20 years. 17 By 1968, Japan had
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become the second-largest economy in the world. 18 Government leaders and businesses prioritized technological advancements, capital accumulation, improved quality and quantity of labor, and increased international trade. 19 The success of this era was built upon the principles of collaboration and commitment to quality—values that continue to underpin Japan’s approach to business and social responsibility today. However, by the early 1990s, Japan’s economic bubble burst. This so-called “Lost Decade” extended from 1995 to 2007, the country’s GDP fell from US$5.55 trillion to US$4.58 trillion. 20 This period of prolonged stagnation, along with the global financial crisis in 2008, shifted Japan’s approach to the financial sector. Businesses became more prudent and more focused on risk management. 21 Modern Japan Challenge Japan stands as the world’s fourth-largest economy, valued at US$4.2 trillion. 22 The economy is heavily dominated by the service sector, contributing 70 percent of GDP (gross domestic product) annually over the past decade, with the industrial sector making up most of the remainder. 23 The country is home to forty-one Fortune 500 companies. 24 While large companies play a critical role in Japan’s economy, Small and Medium Enterprises (SMEs) are the lifeblood of the nation. Many of these SMEs are family-owned businesses with around fifty employees, collectively employing an estimated 3.6 million people, or 70 percent of the workforce. 25 According to The Economist , these smaller firms are often less productive than comparatively sized businesses in other wealthy countries. 26 The productivity gap between Japan’s SMEs and its larger companies is greater than the average for OECD countries. 27 This gap highlights a major challenge for Japan’s economy. Although SMEs are essential, many are at risk of closure due to aging owners who either cannot find successors or are reluctant to sell to non-Japanese companies. In 2023, 60 percent of the 50,000 SMEs that closed were still profitable when they shut down. In 2000, 80 percent of leadership transitions in SMEs involved a family member taking over, but today that number has fallen to 34 percent. 28 The closure of SMEs will have a domino effect, particularly on suppliers and buyers in rural areas. These trends are not unexpected or new. The Japanese government, as well as private and philanthropic organizations, has been actively addressing issues related to aging populations, the decline of SMEs, and rural economic stagnation. However, more action is needed. Efforts to rejuvenate rural areas and SMEs are further challenged by climate change and Japan’s reliance on imported food and energy.
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Natural Disasters and Response Define a Commitment to Impact As an island nation on the Pacific Ring of Fire and Pacific Earthquake Belt, Japan is accustomed to living with natural disasters—earthquakes, tsunamis, typhoons, floods, and volcanic eruptions. The word “tsunami,” meaning “harbor wave,” originates from Japanese, a reflection of the country’s deep historical connection to these phenomena. These ongoing threats require Japan to maintain a state of preparedness for responding to crises in order to remain resilient. In March 2011, the Tōhoku Great East Japan Earthquake registered a magnitude of 9.0 and was followed by a massive tsunami with one-hundred-foot waves. 29 Japan’s earthquake-resistant building designs helped to minimize the death toll to one hundred casualties. However, nearly twenty-thousand lives were lost in the subsequent tsunami. 30 The event, often referred to as the “Triple Disaster” due to its economic, political, and social consequences, was devastating: 138,000 buildings were destroyed, and economic losses amounted to US$360 billion, making it the most expensive disaster in human history. 31 Japan’s responses to the earthquake and tsunami were rapid, effective, and lifesaving, and they are credited with enabling the successful evacuation of over 470,000 people in the aftermath. 32 The powerful quake also caused a meltdown at the Fukushima nuclear plant—marking the worst global nuclear crisis since Chernobyl in 1986. While the immediate response to the earthquake and tsunami was praised, the government’s handling of the nuclear crisis at Fukushima provoked widespread criticism. 33 The Tōhoku Great East Japan Earthquake changed Japan in fundamental ways. It disrupted Japan’s extensive global supply chains, and in response to the closure of its nuclear reactors, the Japanese government significantly increased its reliance on imported oil to fill the energy gap. 34 By 2012, Japan experienced record trade deficits, totaling US$78 billion. 35 It also changed the country socially and politically. A strong anti-nuclear movement emerged in the wake of the Fukushima crisis, leading to the implementation of more stringent safety standards and regulations for the nuclear industry. 36 Today, with climate change and the need to phase out oil and gas, new discussions are underway to identify how Japan will address its future energy needs and whether nuclear power will once again be considered a viable option. 37 Professionals and volunteers from Japan and around the world were mobilized in rescue efforts. Mitsuaki Aoyagi, Vice-Chair of the Executive Committee at SIIF, was working at the
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Nippon Foundation at the time and led the foundation’s special support team. He planned and implemented many reconstruction projects in collaboration with business and the government. He said, “It was an experience that demonstrated the capacity of the people of Japan from all walks of life to help and give generously. It demonstrates living with the potential for natural disaster builds a close-knit and compassionate community.” 38 Brookings Institute also noted that the disaster “...revealed Japan’s most valuable asset: the strength of its civil society. The world watched in awe as Japanese citizens who had lost everything, immediately sprung to help one another. The dignity, creativity, and orderly response of the Japanese population to this mega disaster is indeed the best measure of Japan’s potential.” 39 Following the event, Japan saw a surge in the number of non-profit groups and a swell in the culture of volunteerism across sectors. 40 When asked for one word that represents the core of his own belief and that of the Japanese people, Mitsuaki Aoyagi responded with “justice.” After leading reconstruction efforts following the earthquake, he focused on creating just conditions for children living in poverty, publishing Japan’s first social loss estimation derived from child poverty. Aoyagi also began researching and modeling impact investment, ultimately leading to the establishment of the Social Impact Investment Foundation (now SIIF) in 2017. Since then, he has dedicated himself to the advancement of impact investing in Japan, including supporting the nation’s first Social Impact Bond (SIB). Justice and impact define the SIIF culture and are embedded in Japan’s impact investing and Impact Economy— helping others through collaboration and using capital for impact and common good. (More on this in the case What is Impact: Who Decides and Why It Matters .) What is the Impact Economy GSG Impact, an international network active in over fifty countries, 41 was formed as GSG in 2015 as the successor to the 2013 Social Impact Investment Taskforce under the UK presidency of the G8, which later became the G7. 42 Its primary goal is to foster a global network that promotes impact investing. There are many definitions of impact investing, but GSG Impact adopted the Global Impact Investing Network (GIIN) definition: “Investments made with the intention to generate positive, measurable social and/or environmental impact alongside a financial return.” 43 For almost a decade, GSG Japan National Advisory Board, now GSG Impact Japan National Partner (GSG Impact JAPAN), was supported by SIIF as its main secretariat, working to build an impact investing ecosystem. This role and its objectives will be further discussed in the section on SIIF strategies. In 2022, GSG Impact JAPAN and SIIF expanded its scope
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to encompass the Impact Economy, adopting a more comprehensive definition: “A more inclusive, equitable, and environmentally responsible economic system. An impact economy is where all investment, business, consumption, and government decisions are taken with impact at its core. The transition to impact economies is crucial to address urgent global challenges .... the scale of the world’s problems has changed .... and new levels of public-private cooperation and commitment by all to positive impact will be required to achieve a future where no one lives in poverty and the planet thrives.” 44 While discussions around new forms of capitalism that prioritize both people and the planet have been ongoing for some time, this concept remains relatively new for GSG Impact JAPAN and its members. Global examples include Eric Beinhocker’s work at the Institute for New Economic Thinking at the University of Oxford Martin School, where he collaborates with the OECD to reimagine economic models that promote community wealth building and tackle climate change. 45 Influential ecological economists such as Herman Daly, 46 Robert Costanza, 47 and Kate Raworth—through her Doughnut Economics framework— 48 have contributed to these conversations. Additionally, Johan Rockström’s nine planetary boundaries 49 and Paul Hawken’s concepts of regeneration and natural capital 50 have offered new forms of capitalism for several decades. Some GSG Impact Japan members, like Megumi Muto, Vice President of the Japan International Cooperation Agency (JICA), have engaged in work related to ecosystem-based economic principles and planetary boundaries. 51 However, for many in the GSG network, including GSG Impact JAPAN and its members, these ideas are still unexplored. As SIIF and GSG Impact JAPAN further refine their scope and strategy of Impact Economy, these global economic models may offer interesting and relevant perspectives. Sir Ronald Cohen, the founder of GSG, asserts that this broader definition will help ESG become more transparent about both their positive and negative impacts. Cohen calls out the negative impacts of large companies: “Coca-Cola did $3bn-worth of environmental damage in 2019, and the negative health impact of Danone’s products was nearly $8bn, reveals a new accounting approach. It’s time for self-serving, inaccurate ESG reporting to make way for proper evaluation of companies’ social and environmental impacts.” 52 Cohen’s call to action emphasizes the need for greater transparency and accountability within the Impact Economy. Globally, actions are being taken to address these concerns. The International Sustainability Standards Board (ISSB) and the US Securities and Exchange Commission (SEC) are establishing standardized metrics for measuring various impacts, such as
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carbon emissions and water usage. 53 These efforts aim to enhance transparency and ensure investors have reliable information on companies’ environmental and social performance. They also will result in regulations that will impact Japanese companies operating globally. In Japan, finance authorities are mandating disclosure standards that are projected to affect nearly four thousand public companies in Japan. 54 In 2022, during a speech in London, former Prime Minister Kishida advocated for “new forms of capitalism” that represent a “stronger, more sustainable version” capable of addressing widening inequality, climate change, and urbanization challenges. 55 This vision aims to create sustainable and inclusive economies in Japan and other democratic nations to uphold freedom and democracy. Kishida noted the evolution from laissez-faire economics to the welfare state and neoliberalism, calling for enhanced collaboration between public and private sectors. 56 Prime Minister Shigeru Ishiba has expressed his intention to carry on the work of Prime Minister Kishida’s economic policies. 57 Ishiba, as the son of a long-serving politician from Tottori (a rural part of western Japan), has positioned himself as a champion of Japan’s “forgotten” regions. A former defense minister, he has pledged to clean up the ruling party, revitalize the economy, and address security threats from Russia, China, and North Korea. 58 Most interviewees expressed optimism that the new administration would support an impact economy, albeit with modifications. When asked about potential threats to Japan’s Impact Economy and focus on sustainability, several interviewees pointed to geopolitics, and in particular to the 2024 United States (US) election and the rise of far-right candidates. During Donald Trump’s first presidency, G7 members were discouraged from discussing climate change and sustainability, 59 leading to concerns that his second term could undermine sustainability regulations and collaboration on climate change and the UN Sustainable Development Goals. Despite the politicization of ESG, Japan has expanded its commitment to sustainability and has been recognized as an international “hot spot” for ESG initiatives. 60 On a global level, even with the politicizing of ESG, the Morgan Stanley Institute for Sustainable Investing and Wealth Management 2024 survey of individual investors found a continued growing interest in sustainable investing. The survey found that more than three-quarters of global investors are engaged in sustainable investing, with 57 percent reporting increased interest in the last two years and more than half anticipating higher allocations in the next year. 61 The drivers behind this surge include new climate science findings, performance data on sustainable investments, and a belief that strong ESG practices can lead to higher financial returns.
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Despite mounting interest in sustainable investing, many investors are still concerned about the risk of greenwashing and the lack of transparency in ESG data. Over 60 percent cited these concerns, highlighting the need for clearer standards and better reporting. 62 While investors favor environmental solutions—such as water management, healthcare, and climate action—many remain uncertain about how to approach social themes, indicating a gap in targeted investment options. Moving forward, there is significant growth potential for asset managers and financial advisors who can provide more guidance and innovative investment solutions. As sustainable investing continues to gain momentum, offering transparent and impactful investment opportunities will be crucial to meeting the evolving demands of global investors. Evolving Definition and Mainstreaming Sustainable finance and sustainable investing have a long history, both globally and in Japan. Some trace the origins of Japan’s interest in sustainable investing back to 1997, when the Kyoto Protocol under the UN Framework Convention on Climate Change (UNFCCC) established global guidelines for addressing climate change. Others cite 2015, when the commitment to sustainable finance deepened with The Paris Accord and Japan’s Figure A: Illustrates key milestones in the development of sustainable finance in Japan.
2000
2005
2010
2015
2020
2015 SDGs, Paris Agreement
2006 Principals for Responsible Investment International or Government-Led Initiatives
2006 Principles for Responsible Investment
2019 Principles for Responsible Banking (PRB)
2020 EU Taxonomy
2003 Equator Principles
2017 Task Force on Climate- Related Financial Disclosures (TCFD)
2000 CDP (former Carbon Disclosure Project)
2014 The Green Bond Principles (GBP)
2017 The Social Bond Principles (SBP)
Private Sector-Led Initiatives
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Government Pension Investment Fund (GPIF)—the world’s largest pension fund—signing the United Nations Principles for Responsible Investment (PRI). These milestones, coupled with the formation of the GSG Impact and early investments in Green Bonds, Social Bonds, and pilot pay-for-success Social Impact Bonds, set the stage for sustainable finance in Japan. The definitions of sustainable finance, Impact Finance, and the Impact Economy used in Oxford executive education programs include a broad spectrum of asset classes. For example, the Sustainable Finance tools can be seen below in Figure B. Leveraging and creatively blending these diverse sources of capital will be essential to bridging the multi-trillion-dollar funding gap for the UN Sustainable Development Goals (SDGs) and achieving systemic change. Figure B: Sustainable Finance Tools
Sustainable Lending
ESG Investment (= Sustainable Investment)
(E.g.) Sustainable Loan
Environmental/Social policy
1. Negative screening 2. Positive screening 3. International norm screening 4. ESG integration 5. Sustainable theme investment 6. Impact investment 7. Engagement/Exercise of votes
Sustainable Bond (= ESG Bond)
(E.g.) Green bond, Social bond
Others (E.g.) Blended finance, crowdfunding,
impact investment, performance-based outsourcing contract
During interviews, the specific definition of the Impact Economy varied among participants. Those in finance tended to include sustainable finance and ESG within their definitions, while representatives from the nonprofit and philanthropic sectors often focused on impact investing. Some viewed ESG as a negative screening process rather than a proactive investment strategy. When asked to assess the position of impact investing within mainstream finance, as seen in Figure C, most interviewees placed it in the ‘Pilot’ or ‘Innovate’ stages, indicating it has progressed, but has not yet fully integrated. In contrast, ESG and sustainable finance were seen as further along, reaching the “Mainstream” quadrant, particularly within global banks.
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Figure C: Phases of Development
Mainstream
Innovate
Pilot
Plan
Time
In August 2024, executives Masahiro Minami, President of Resona Holdings, Toshiaki Sumino, President of Dai-ichi Life Insurance, and Masahiro Kihara, President of Mizuho Financial Group, convened to clarify their support for “impact finance,” calling for private financial institutions to collaborate in addressing social and environmental challenges, such as renewable energy. 63 The Japan Impact-Driven Financing Initiative (IDFI) was started in 2021 with twenty-one banks, insurance companies, asset managers, and other organizations. Today, there are seventy- three companies listed as signatories. 64 The IDFI’s purpose is to promote impact investing through collaboration with different financial institutions. 65 According to these leaders, there is a growing awareness of impact finance, and the market environment has improved due to supportive government policies. In response, financial institutions are increasingly using this type of financing to not only generate returns but also address social issues.
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To navigate this evolving landscape, financial institutions recognize that “new skills are required to balance profit and impact and stay ahead of fast-moving changes in this evolving field.” 66 This presents both a challenge and an opportunity: developing robust business models based on social and environmental outcomes. According to the IDFI, “collaboration between and among companies and financial institutions is crucial.” 67 Nanako Kudo, Member of the Executive Committee of SIIF, agrees that the definition of the Impact Economy is still evolving in Japan. She explains, “Unlike impact investing, which is clearly defined and focused on an investment, we are trying to define the term in a way that Japanese stakeholders can share the vision for an impact economy and use it widely.” 68 Kudo adds, “SIIF expanded its strategy beyond impact investing, because to achieve systemic social change, we need to work on all the different pieces of the ecosystem. We don’t have sufficient capital and collaboration, and commitment is needed across philanthropy, family offices, private investors, pension funds, government, and consumers.” 69 She stresses, “We need to be able to change governance structures that will incentivize and support both start-ups and big corporations that lead to new consumer behavior.” 70 Sizing Japan’s Impact Ecosystem By the Numbers Sustainable Finance and ESG Sustainable finance in Japan has access to the largest pool of capital and is estimated at ¥537.6 trillion (approximately US$3.6 trillion) and is growing. 71 It is driven by global and Japanese sustainability disclosure standards, climate goals to achieve net zero emissions of carbon dioxide (CO 2 ) and expanding business interest in sustainability and impact. Japan has been called the “next ESG hotspot” by insurance investors and the media. 72 At a time when ESG investing has become a political football, Japan has thus far successfully managed to “tread the ESG Tightrope.” 73 The areas in which ESG and sustainable finance have expanded are Green, Blue, and Sustainability Bonds in public and private investments at an estimated ¥6.7 trillion (about US$44 billion) in 2023. 74 In September 2022, Maruha Nichiro Corporation issued Japan’s first blue bond, raising more than ¥6 billion (US$39 million), surpassing the ¥5 billion issuance target. 75 The objective of the fund was to support an inshore salmon aquaculture project in Toyama Prefecture in collaboration with Mitsubishi Corporation. This project was evaluated according to the International Finance Corporation’s (IFC) Blue Finance Guidelines, which provide guidance on assessing contributions to ocean sustainability.
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On July 6, 2023, Mizuho Financial Group issued a green bond valued at US$1.4 billion, marking the largest ESG bond issued by Japanese financial institutions. 76 Their new medium-term business plan, effective from FY2023, outlines Mizuho’s long-term vision for a sustainable society and economy. They employed back-casting to define their ten- year goals and the strategies necessary to achieve their long-term vision, positioning the response to climate change as a primary focus within their core business theme of Sustainability and Innovation. Climate change and biodiversity protection have emerged as priorities among the banks and investors interviewed. Green, Blue, and Sustainability Bonds serve as key mechanisms for these institutions to demonstrate their commitment to sustainable investments. 77 Individual Wealth and Philanthropy The rise of new wealth and family offices presents significant opportunities for the growth of Japan’s philanthropic sector and impact ecosystem. The number of households classified as high-net-worth or ultra-high-net-worth (UHNWI) increased to 1.5 million in 2021, an 83 percent increase from 810,000 in 2011. 78 Japan ranks fourth globally with 14,940 UHNWIs holding assets of US$1.4 trillion. 79 While many affluent individuals are still older, Japan’s younger generation shows increasing interest in entrepreneurship. Philanthropic advisory services are emerging in Japan. Yuko Koshiba and Yoshiko Fujita founded Philanthropy Advisors, modeled after Rockefeller Philanthropic Advisors. Both Koshiba and Fujita noted that their clients currently prefer to support personal passions, particularly in education, rather than engaging in impact investing. 80 Despite the prevalence of older Japanese billionaires, the next generation of UHNWIs is on the rise. For example, 33-year-old Shunsaku Sagami was named Japan’s youngest billionaire by Forbes, with a net worth of US$1.9 billion from his AI-powered startup, M&A Research Institute. 81 Educating wealthy individuals lays the groundwork for increasing their involvement in impact investing and the broader impact economy. Specifically, instruction on deploying strategic capital in impact investing and blended sustainable finance, in addition to policy reforms, incentivizes and sustains these relationships.
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Impact Investing Michiru Toda, Chief of the SIIF Impact Economy Lab, highlights the growth of impact investing in Japan. According to the 2023 survey, total impact AUM reached ¥11.54 trillion (approximately US$75 billion), a 197 percent increase from the previous year. 82 This rapid growth was primarily driven by an increase in investments by existing impact investing organizations, rather than newcomers. 83 Since the formalization of GSG Japan National Advisory Board, now GSG Impact JAPAN, impact investing has grown from ¥33.7 billion (about US$221 million) in 2016 to the ¥11.54 trillion (about US$75 billion) today. 84 In comparison, the global market has also seen significant growth, with the GIIN estimating the worldwide market at US$1.164 trillion: the first time this widely-cited estimate has surpassed the US$1 trillion mark. 85 GSG Impact JAPAN is further discussed in Chapter 4: SIIF as Catalyst, Convenor, Collaborator.
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